Alternative and specialty equity and debt financing transactions are generally very complex, as compared to simple transactions that involve, perhaps, fixed rates of return, fixed terms, fixed pricing and, in some cases, relatively established, large and untroubled companies. Alternative and specialty equity and debt financing transactions, such as venture capital and private equity transactions, are a critical component of economic growth in the modern world. These transactions involve a great deal of risk for every party, including, but not limited to, the company founders, management, employees, venture fund partners, individual investors, pension funds and others. A complex array of contractual provisions, or terms, have arisen over time to allow investors in these transactions to mitigate and allocate risk in a manner that marries opportunity with reality to an acceptable degree as to induce a willing and able party to invest in one or more staged financings, or “rounds” offered by a particular early stage company.
An example of the complexity and range of these contractual provisions, or terms, is evidenced in, by not limited to, the National Association of Venture Capitalists' (NVCA) model venture capital financing documents. An indication of the complexity of these transactions is the very size, in terms of words and characters, of these model document, which relate to a single, and early, prospective and actual round of Series A financing. Of the 8 model financing documents displayed on the NVCA's web site, 6 of the documents contain language, rights and terms that would, do or could, impact a number of future or past financing, liquidity or other scenarios, the impact of which can only be illustrated with financial models. These 6 documents, for a single financing transaction, consist of over 67,000 words to convey the rights, making it unlikely that the impact of these requirements can be quantified, in specific terms, simply by reading the documents, even if they are read over and over again by an experienced professional. This complexity, along with the related length and mass of text, means that in many cases a counselor to the company, or other party involved in a prospective or actual financing transaction, will begin the process of drafting transaction documents by copying a textual, or word processing, file used in a previous round of financing or with a prior company the party had worked with or on.
While this process of copying text is beneficial to all parties, with regards to getting the process moving forward, reducing short-term and immediate legal and advisory expenses incurred, and other factors inherent in the urgency of getting deals done, it suffers from requiring an entirely separate process to have the impact of the proposed or actual terms and contractual language quantified. Similarly, without a means to quickly capture the quantifiable aspects of a given term or contractual passage, and allow further editing and relatively copying of those elements, several likely scenarios for understanding and acting on the potential and anticipated financial impacts of the elements exist. None of these alternatives are particularly favorable, or efficient, especially in light of the present invention. One possibility is that a great deal of effort and expense is incurred to get each and every term modeled using prior art resources, such as spreadsheets and or existing limited template or programmatic solutions. Some of these models and solutions may model liquidation scenarios, or facilitate rather rigid, and virtually un-auditable, estimates of anti-dilution provision or liquidation preference impacts. Moreover, each of these solutions will require either an extensive manual input of information or a tedious editing of formulas, formulas that are difficult for parties other than their author to quickly understand, verify and edit.
Another alternative possibility of dealing with the lack of means to quickly capture the quantifiable aspects of a given term or contractual passage, and allow further editing and relatively copying of those elements, is to rely on prior experience and intuition and argue, or allow and not argue, for terms that are perceived in hindsight to be relatively more important or less important. This is, in all likelihood, the most popular route. While it is often less expensive, with regard to immediate cash expended in the form of professional service fees, it is potentially the most costly in industries built on competency and relationships, such as the venture capital and private equity industries. As an example, a party might argue for a full-ratchet anti-dilution provision, even though under any of the party's own anticipated scenarios the likely impact of having such a provision, as opposed to a less severe provision, on their return would be nominal. However, without a means of cost effectively accurately modeling that impact, with limited human input required, a lack of awareness of the chasm between intuition and quantifiable reality exists.
The final possibility, and ideally the least likely approach taken in response to the limited alternatives in the prior art, is to take a position that the financial impact of terms is of little importance since, in the end, the parties have no direct control over when and how a liquidity or subsequent financing event occurs. This, of course is often a self-fulfilling prophecy that no solution can address entirely. However, with the ease enabled by the present invention's ability to copy terms from one deal to another to be modeled quantitatively, the invention could still help in even this case.
In view of the foregoing, there is a strong need for novel systems and methods that can allow a user to copy equity and debt financing terms, from one of a variety of securities, selectively and or aggregately, in a manner that enables rapid visualization, comparison and viewing of the financial impact of copied terms in a hypothetical or actual liquidation, public offering, financing or other financial scenarios.